5 Year Business Plan

Many may argue that forming a business plan for the next five years is overly optimistic and full of too many assumptions. Projecting too far into the future in a very dynamic market will only result in a strategy that necessarily diverts from its normal path. However, a 5 year business plan is often created as a method of determining the future potential of the company given a set of scenarios and have an idea of how it will grow. Much like adults planning for retirement, the same logic applies that if steps are made well in advance, that they will be more likely to achieve an end result immediately. Contact Pro Business Plans to learn more about its 5 year business plan.

Most established companies rarely ever change their business model, but Startup companies can change several times over the course of the first five years. General Electric is one company that shifted from manufacturing household appliances to diversification in several sectors, but it is a rare for a company that size to change. Younger companies should remain dynamic, but project their present strategy over a period of five years. For instance, a manufacturer that wishes to add several new product lines over the course of the next three years should have an actionable plan to achieve this. The business model should be dynamic, but placed in the plan as a projection of its current state.

A 5 year business plan is most notably differentiated by the projection term of its financial statements. This may be particularly important in cases where changes to a business model will take several years to reflect. For instance, the acquisition of a new company may take four to five years for the synergies to reduce the cost of goods sold for a manufacturer. For a new technology, it may take several years to draw a profit with heavy investments into marketing and research. Therefore, profitability may only emerge after the fourth year, which would not be reflected in a business plan of a shorter term. A 5 year business plan may be requested by investors with the intention to better understand how these scenarios are reflected.